Should Florists Use Group Buying Coupon Sites?

If you are the owner or manager of a florist shop, then the quiet months of winter are a great time to think about how you can promote your business to the flower buying public.

One marketing option that may tempt you is the red-hot new group buying coupon trend.

What are Group Buying Sites?

In the last year there has been a rapid proliferation of group-buying websites. These sites deliver big discounts to consumers who sign up to receive daily deals via email, which they can buy into.

The vouchers work on a group buying system, where a certain amount of people must commit to the purchase before the deal goes through. If the minimum purchaser amount (or more) commit to buy then the consumer’s cards are charged and they get a discount voucher emailed to them.

This service is popular because it provides bargain hunters with awesome deals. I recently bought a car servicing for an obscenely low price!

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Should You Try This To Promote Your Floristry Business?

From the perspective of florists, on the surface it seems like a no-brainer – sell some flowers for a small loss to win over some completely new customers. After all, you gotta spend money to make money, right?

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How Group Buying Deals Are Structured

I just got off the phone to a friend of mine who is a small business person (not a florist). She recently tried a major group buying site and isn’t very impressed with the experience.

She said that the deal she discussed with the salesman was for $120 worth of product but the salesman insisted they claim on their site that the real price was $180 so it looked like an even better deal. She went along with it but later regretted it, because now she realizes that when she goes to make subsequent sales to the customers this deal brought in, they are quite likely to notice the difference in price and realize that they’d “been had” (of course she could just charge them $180).

They agreed to make the discount price $59 but the group buying site take 50% of the asking price so once she had paid GST on her half that left her with approximately $27 per sale, which is about a 77% discount!

63 people purchased the deal. The coupon company takes in ALL the money up-front and then pays service providers ONLY for the coupons that actually get used – which she has to manually enter each week into an automated online system – an additional, admittedly small, admin task to be factored into the cost.

In the one month since the deal ran she’s had 20 vouchers cashed in, which in this case represents 30 hours of her billable time, but has not seen one red cent yet despite being promised prompt weekly payment. Consequently she’s been spending loads of time on the phone trying to get paid.

Of these 20 clients she’s had one repeat visitor. So, assuming she eventually secures the $540 the coupon company owes her, she’s so far spent $1840 (plus additional admin time) to acquire one new repeat customer.

The hard truth is that just because a person buys an item for 50% off does not mean they will return for normal priced products, in fact, on average less than 20% do.

So let’s break it down:

How to Calculate the Cost of a Group Buying Deal

Let’s say the original retail selling price for one of your wonderful bouquets is $200. Say your company sells this at a 100% mark up, so it costs you $100 wholesale.

If you enter in to a group buying coupon deal and sell the products at a 50% discount – then pay the coupon company 50% of the discounted price – you lose $50 on the sale.

Now, if only 20% of these new customers return later then each repeat customer cost $250 to get back into the store to the point where they are prepared to buy something at full retail price. This means you will not make any money out of them until they buy their FOURTH $200 bouquet and even then you will still only pocket 50% of the usual profit on that fourth sale. (However, if you are confident that the lifetime value of these customers is likely to end up being significantly higher than this amount, then you may decide it is worth the initial cost.)

Also consider this: what if some coupons were sold to existing customers who would otherwise have bought at the full price?

There are lots of ways to buy new customers that are a lot cheaper than this!

Have any florists or events companies out there used a group buying promotion? Let us know in the comments below how it went for you – was it worth it?

Seamus is Tesselaar Flowers' digital marketing manager. He's a creative marketing geek, writer, musician & accidental flower lover. He helps small businesses with websites and web marketing. If you need any help regarding the Tesselaars website you can contact him on seamuse@tesselaars.com

Comments

Hello, I find your attitude towards the group buying very negative. We recently tried this type of marketing and whilst it was a lot of very hard work, it has opened more doors than we expected. First of all, we did not amp up the price to make it appear
a good deal, it was basically just a great deal. We benefited in the following ways: 1. We made a small profit on the goods sold (543 vocuhers sold), a profit of something that we did not have 2. We collected additional funds for those who wished to have their
flowers delivered 3. It bought over 300 people through our doors in the weeks leading up to Mothers Day, especially important for anyone who has not previousaly visited 4. All clients received our business cards 5. We collected over 400 new emails addresses
willingly given for us to email our specials direct 6. We have noticed an exceptional increase in our online sales since the promotion As you can see, it clearly depends on the business, the promotion offered and how it is structured. We offered a reasonably
inexpensive, popular flowers with very little labour involved. We will certainly be doing it again in the quieter times to boost the sales and remind everyone we are here! Thanks, Embellish Flowers and Gifts – Adelaide

Hi, I agree with Meredith. We recently ran a promotion for a dozen long stem roses (any colour). We targeted our immediate area rather than the whole of Sydney, but did receive orders from out of area which also enabled us to charge an extra fee for delivery.
We priced the promotion so we would make a small profit and we also collected email addresses so we could offer future promotions to these ‘VIP’ customers. We were also able to up-sell with the orders with items such as chocolates and vases. The Group Buying
company paid us 50% of our share up-front within two days of the close of the campaign and the balance is paid progressively when the coupons are redeemed. We offered exceptional service and amazing presentation of the flowers and have already had repeat business
from the new customers. We will definitely do it again.

Well there you go! Thank you Meredith and Teresa for this information. We were certainly playing the Devil’s Advocate about it all. When I started writing the post I had actually meant to follow an argument that you’d want to be managing the process pretty
well (collecting emails, choosing easy deliverables, etc) and it seems that you did this. Then Steve (CEO) and I started talking about it and doing sums and it just didn’t seem to add up to us, but it is interesting to get some reports back from the front
line! I guess all we are saying is “buyer beware” and yes, think the process through but hey if it works – it works!

Hi Seamus. I have considered the group buying concept for our business, as I have purchased some very good deals for myself. You have already done the research that I hadn’t got around to, so thanks for that. Good to get feedback from those who have tried
it too. Keep the articles coming! Cheers